PWR Holdings (ASX:PWH) Wins $13.5M Defence Contract: Time to Buy the Aerospace Pivot?

PWR Holdings Lands $13.5m US Defence Follow-On Contract

PWR Holdings (ASX: PWH) surged nearly 10 per cent on Monday after the company announced a A$13.5 million (US$9.1 million) follow-on contract with the US Government. This is PWR’s second deal with American defence agencies in less than a year, building directly on the initial order announced in January 2025. For investors who watched the stock struggle through a tough FY25, this repeat business sends a clear signal: PWR delivered on its promises and earned the trust of one of the world’s biggest defence customers.

The deal covers advanced cooling technology for military use, with deliveries running through to FY27. More importantly, it puts PWR Holdings on track for full-rate production status. If achieved, this could open the door to much larger orders in the future.

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PWR’s Defence Strategy Shows Real Progress

This contract matters beyond just the money. The fact that it’s a repeat order means the US Government was happy with what PWR Holdings delivered the first time. In defence work, winning a second contract is often harder than getting the first one. So this is genuine proof that PWR Holdings can compete in this space.

The numbers back this up. PWR’s defence segment grew 28 per cent in FY25, even while its traditional car and motorsport business faced challenges. Management has been working to shift the company away from up-and-down automotive markets towards steadier, higher-margin defence work. This contract suggests that the plan is on track.

US Defence Spending Creates a Strong Tailwind

The timing works in PWR’s favour. The Trump administration has proposed a US$1.5 trillion defence budget, the biggest in American history. This wave of spending benefits companies that already have relationships with the US Government, and PWR now fits that description.

Defence programs usually start small while the government tests a new supplier. Once a company proves it can deliver, order sizes grow significantly. PWR appears to be moving through this process successfully. If they reach full-rate production, the revenue opportunity could be several times larger than these initial contracts.

For a Queensland-based company, building this kind of US Government relationship takes years. PWR has done the hard work and now sits in a strong position to capture more business as defence budgets expand.

The Investor’s Takeaway

At A$9.59, PWR Holdings has rallied hard from its recent lows near A$6.00. The recent 10 per cent jump shows the market is taking notice of the defence progress. However, valuation remains stretched after a difficult FY25 where earnings fell around 60 per cent due to factory relocation costs and program completions. PWR now trades on a trailing price-to-earnings ratio above 85 times, which assumes a strong earnings recovery ahead. The company needs to turn contract wins into actual profit growth for this to make sense.

The main risks are execution and concentration. PWR’s defence growth depends heavily on US spending, which can change with political shifts. If the aerospace pivot slows or margins disappoint, the stock could fall further.

Our view is that PWR Holdings offers an interesting turnaround story at current levels. The A$13.5 million contract proves the strategy is working. For investors comfortable with some risk and willing to hold for the medium term, this looks like a reasonable entry point. More cautious investors may want to wait for clearer signs of earnings recovery.